Breaking Down Barriers: SEC Revokes Rule Restricting Banks from Owning Bitcoin
In a significant move, the U.S. Securities and Exchange Commission (SEC) has abolished an accounting rule that forced banks to treat bitcoin and other digital tokens as a liability on their balance sheets. This decision marks a major victory for the crypto industry, which has long lobbied for a more favorable regulatory environment.
The Background: SAB 121 and Its Impact
Introduced in 2022, Staff Accounting Bulletin 121 (SAB 121) subjected digital assets to strict capital requirements, significantly raising the financial and regulatory risks of offering crypto custody services. This measure led to increased operational costs for financial institutions, ultimately discouraging broader participation by Wall Street in crypto markets.
A Bipartisan Effort
Efforts to overturn SAB 121 gained bipartisan support in Congress last year. However, then-President Joe Biden vetoed the proposed legislation, leaving the rule intact and further discouraging banks from adopting digital assets.
A New Era for Crypto
The SEC’s decision to revoke the rule paves the way for banks to expand their crypto offerings beyond derivatives trading and offering ETFs to wealth management clients. SEC Commissioner Hester Peirce, who will lead a new “crypto task force” within the agency, praised the announcement, saying “Bye, bye SAB 121! It’s not been fun.”
Industry Reaction
The CEOs of major banks, including Goldman Sachs, Morgan Stanley, and Bank of America, have expressed interest in revisiting their crypto strategies in light of the changing regulatory landscape. With the removal of this significant barrier, the door is now open for greater institutional participation in the crypto market.
A Shift in Regulatory Tone
The SEC’s decision marks a significant shift in regulatory tone, one that is more favorable to the crypto industry. As the agency works to develop a comprehensive and clear regulatory framework for crypto assets, the possibilities for growth and innovation in this space are vast.
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